Uncertainty about the direction of the U.S. economy has been associated in recent years with weaker growth, at least in part because the Federal Reserve has kept short-term interest rates pinned near zero, argues new research from the Dallas Fed.

Typically, the Fed lowers rates to stimulate the economy during downturns such as the 2007-2009 recession. But short-term rates hit bottom in December 2008 and can’t go any lower, a limitation known as the “zero lower bound,” or ZLB. That limits policymakers’ options going forward, and “the increase in uncertainty that occurs at the ZLB is due to the restriction it places on the central bank,” economists Michael Plante, Alexander Richter and Nathaniel Throckmorton wrote in a recent working paper.

Mr. Plante is a senior research economist at the Dallas Fed. Mr. Richter is an assistant professor of economics at Auburn University. Mr. Throckmorton is a visiting assistant professor at DePauw University.

The economists compared U.S. economic growth, as measured by changes in gross domestic product, with economic uncertainty as measured by indicators like the Philadelphia Fed’s Survey of Professional Forecasters, with a wider range of predictions about future growth signaling more uncertainty about the economy’s direction.

They found only a weak correlation between uncertainty and growth — except in the years since the last recession, when there was “a strong negative correlation between macroeconomic uncertainty and real GDP growth,” they wrote. In other words, more uncertainty has been closely associated with lower growth for the past half-decade.

The economists speculated that this time is different because the Fed has anchored interest rates near zero for the first time. Using an economic model, they found uncertainty is higher when interest rates are at the zero lower bound. The Fed can’t respond to falling demand and output with lower interest rates, and even low inflation creates higher “real” interest rates that potentially restrain economic growth, the economists wrote.

“During the Great Recession many central banks around the world sharply reduced their policy rates and effectively hit the ZLB for the first time in their history,” the economists wrote. “We contend that those policies contributed to the strongly negative correlation between uncertainty and output growth during the Great Recession.”

Of course, other forces could be at work, such as the unusual length and severity of the recession or the long hangover from the 2007-2008 financial crisis. Still, the economists wrote, “while it may not be the case that the ZLB is the only factor driving the higher uncertainty, our results provide strong evidence that it is a[n] important factor.”

The Fed and other central banks also have tried to address the problem of the zero lower bound by employing unconventional policy tools, such as bond purchases, to lower borrowing costs and stimulate the economy. Those unconventional efforts are not addressed in the Dallas Fed paper.

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